EXPORTING LOCAL GRAINS VIA CONTAINER FROM AN ILLINOIS RIVER AGRICULTURAL HUB
Prepared by Kimberly Vachal and Mark Berwick
Prepared for: Illinois Soybean Association U.S. Soybean Export Council Illinois Farm Bureau
ABSTRACT A Beardstown, Illinois container-on-barge (COB) facility has river access to by-pass congested roadways in accessing the Chicago inland terminals where millions of trucks pick-up and deliver containers each day. The capacity of the port and rail system has at times been tested and new and innovative ways to move containerized freight need to be examined. One possible alternative for managing the growth rate of container or traditional container truck/rail movements is COB to the Gulf of Mexico, where the goods are transferred from barge to international container vessel ship for shipment. This possibility could include import and export business to Asia via the Panama Canal and the inland-water system. Imports of consumer goods from Asia have been increasing for several years. Containers are shipped to the United States, and traditionally because of equipment operators’ business model, theses containers have often been shipped back to foreign ports empty. Possibilities exist for promoting backhaul of agricultural products in these containers. Agricultural products are increasingly being shipped in containers because of the demand by customers for specific characteristics and control of that product during shipment. Many times customers demand smaller lots or strict product quality monitoring which can only be accomplished by shipping in smaller lots or in containers. This study looked at historical and current container shipments out of Illinois and the potential of agricultural products for backhaul in containers back to Asia. Scenario analysis was conducted looking at the different options and costs for shipping containerized product from Beardstown to Asia. These options included: COB from Beardstown to Chicago, rail/truck to Chicago, transload at Chicago, and finally COB to the gulf and transfer to an international vessel for export.
A special thank you to April Taylor, with the USDA Agricultural Marketing Service’s Shipper and Export Assistance, for her assistance with containerized export market information used in the research.
Funded in part by the soybean checkoff.
TABLE OF CONTENTS INTRODUCTION .............................................................................................................. 1 Scope ............................................................................................................................... 1 Research Objectives ........................................................................................................ 2 Background...................................................................................................................... 2 Container-on-Barge Basics .............................................................................................. 6 LOCAL MARKET PROFILE ............................................................................................ 8 Economic Activity ........................................................................................................... 8 Infrastructure ................................................................................................................. 14 Rail and Highway ....................................................................................................... 15 Waterway ................................................................................................................... 17 Grain Movements .......................................................................................................... 19 Other Container-on-Barge Relevant Traffic .................................................................. 19 U.S. CONTAINER INDUSTRY AND GRAIN ACTIVITY ........................................... 21 GRAIN AND FIELD CROP CONTAINER EXPORT ACTIVITY ................................ 31 SITUATIONAL FRAMEWORK FOR SUCCESS .......................................................... 40 ESTIMATED SHIPMENT TIME AND COSTS FOR EXPORTING CONTAINERS .. 42 CONCLUSIONS............................................................................................................... 46 REFERENCES ................................................................................................................. 48 APPENDIX A. ILLINOIS RIVER INDEX...................................................................... 51 APPENDIX B. BARGE GRAIN FACILITIES................................................................ 53 APPENDIX C. BUREAU OF ECONOMIC ANALYSIS AREAS ................................. 55 APPENDIX D. RAIL CONTAINER VOLUMES BY ORIGIN BEA............................. 56 APPENDIX E. RAIL CONTAINER SHIPMENTS, BY COMMODITY GROUP ........ 59
LIST OF FIGURES Figure 1. World Container Trade ........................................................................................ 1 Figure 2. Container Vessel Rates for Early Ships............................................................... 3 Figure 3. Railroad Container Traffic Trends in the United States and Canada .................. 4 Figure 4. U.S. Ports Container Traffic Balance .................................................................. 5 Figure 5. Modal Capacity Comparison ............................................................................... 6 Figure 6. Beardstown Market Area ..................................................................................... 8 Figure 7. Composition of Market Area Crop Production, 2004 to 2007 ............................ 9 Figure 8. Market Area Trends in Crop Production, 2001 to 2007 .................................... 10 Figure 9. Leading Employment Numbers for Goods-Based Industries by County, 2005 12 Figure 10. Regional Metropolitan and Export Intermodal Hubs ...................................... 15 Figure 11. Major Transportation Infrastructure Map ........................................................ 16 Figure 12. Major Rail Lines and Beardstown Market ...................................................... 17 Figure 13. Illinois River Traffic Levels ............................................................................ 18 Figure 14. U.S. Container Traffic, 1995 to 2006 .............................................................. 21 Figure 15. Rail Origin Volumes, 2000 and 2006 .............................................................. 22 Figure 16. BNSF International Intermodal Network ........................................................ 23 Figure 17. Union Pacific Intermodal System .................................................................... 23 Figure 18. Rail Container Traffic by Major Commodity Groups, 2006 ........................... 26 Figure 19. Grain and Other Agricultural Field Product Container Exports, Average 2004 Funded in part by the soybean checkoff.
to 2006 .................................................................................................................. 29 Figure 20. Reported U.S. Container Activity, Various Sources ....................................... 31 Figure 21. Grain and Field Crop Container Export Activity between 2005 and 2007, by State Indicated as Shipper Location ...................................................................... 32 Figure 22. Illinois Corn and Soybean Container Exports ................................................. 34 Figure 23. Top 10 Import Countries for U.S. Grain and Field Crop Exports, Average Share 2005 to 2007 ............................................................................................... 36 Figure 24. Container and Bulk Grain Rates to Japan........................................................ 42
LIST OF TABLES Table 1. Ethanol Plants in Illinois ..................................................................................... 10 Table 2. Business Activities in the Beardstown Market Area (Cass, Brown, Mason, Menard, Morgan, Sangamon & Schuyler counties), Based on Employment ..... 13 Table 3. Grain Traffic on the Illinois River, 2001 to 2006 ............................................... 19 Table 4. Estimated Empty Container Volume on the Illinois River from Waterborne Commerce Data .................................................................................................. 19 Table 5. Illinois River Container Volume from the OMNI Waterborne Traffic Reports . 20 Table 6. Container Volume Trends for Region, 2001 to 2006 ......................................... 24 Table 7. Public Waybill Container Traffic Summary ....................................................... 25 Table 8. Container Shipments Originated from Top Volume BEAs in Beardstown Market Region................................................................................................................. 27 Table 9. Market Rail Container Originations: Agricultural Products, Trends between 2001 and 2006 .................................................................................................... 28 Table 10. Grain Product Container Originations from the Beardstown Market Region .. 30 Table 11. Rail Grain Container Freight by Origin and Destination Pairs, 2006............... 30 Table 12. Grain Container Export Trends, Largest Volume Originating States ............... 33 Table 13. Illinois Shipper Grain and Other Agricultural Field Product Container Exports, 2001 to 2007 ....................................................................................................... 35 Table 14. Trends for Top Ports for U.S. Grains and Field Crop Exports ......................... 37 Table 15. Top 15 Destination Ports for U.S. Containerized Corn Shipments, 2002 to 2007 ............................................................................................................................ 38 Table 16. Top 15 Destination Ports for U.S. Containerized Soybean Shipments, 2002 to 2007 .................................................................................................................... 39 Table 17. Estimated Delivery Days for Shipment from Mid-America to Asia ............... 43 Table 18. Scenario Analysis of Different Shipping Options ............................................ 45
Funded in part by the soybean checkoff.
INTRODUCTION Logistics has evolved to a critical aspect in production and marketing systems agility. As businesses use widely deployed and effective communication networks to identify trading partners, the flexibility and extent of the world’s ports and steamship lines are increasingly in demand to move goods with specified characteristics in smaller quantities. The multimodal characteristics of container freight have become a preferred transport method for many products in the global market. The influences of globalization continue to increase the demand for container intermodal transportation (Figure 1). Global trade in consumer goods with Asia and Europe create opportunities for secondary or backhaul products such as grain, waste paper, and scrap metal. Interest here is in the potential for inland markets along the Illinois River to participate via container-on-barge (COB), especially with respect to grain and oilseed markets. Although COB is widely used in Europe and the U.S. Pacific Northwest, its operations are small and localized on the Mississippi River system.
Figure 1. World Container Trade Scope The objective of this study is to investigate the potential to use container-on-barge as another mode in the spectrum of west-central Illinois grain marketing alternatives. A case study will be developed for an Illinois River operation that will include container-onbarge in shipping locally sourced grains, oilseeds, and feedstuffs to Asian markets. Specifically, a port at Beardstown, Illinois – which is a local grain marketing hub – will be considered as the facility location. Beardstown is located on the Illinois River about 200 miles southwest of Chicago, the largest gateway for international container traffic in 1
the United States. Beardstown is also 85 miles west of Decatur, Illinois, which is a Norfolk Southern intermodal terminal. It is also within proximity of container pools at Memphis, Tennessee (405 miles); Kansas, City, Missouri (282 miles); and the closest, St. Louis, Missouri (112 miles). Research Objectives The overall objective of this project is to provide producers and agribusiness on the Illinois River with a logistical assessment of exporting products via container from a local agricultural hub. Specific objectives are to: Describe the trends and logistics in the U.S. grain and feedstuff containerized product market, Profile the local Beardstown grain and feedstuff market that is relevant to the container export mode, Assess possibilities for container transportation from the Beardstown agricultural hub on the Illinois River, specifically considering a mode via container-on-barge to the Gulf of Mexico, and Discuss the potential of and alternatives for securing and distributing empty containers as a critical element in a viable agricultural container export operation. Background Malcolm McLean, an entrepreneurial trucking executive, first combined the flexibility of trucking with the long-haul efficiency of deep water transport. He developed the first commercial intermodal vessel operation in 1956 when he loaded truck trailers onto a ship in New Jersey bound for Texas. His refurbished bulk liner had capacity for 500 twentyfoot equivalent units (TEUs). Although there was continued interest and activity in modernizing an ocean-going vessel for this mode, the next notable industry achievement in productivity came on the landside component of the operation. Railroads began to invest in double-stack train technology in the 1980s. This new technology spurred steam ship lines to increase vessel capacity to 4,500 TEUs during that time period. The productivity gains net effect of reduced rates generated additional interest in this flexible international shipping alternative (Figure 2). The size of the modern intermodal shipping vessel ranges primarily from 4,000 to 8,000 TEUs with most new ships being larger. The 8,000+ TEU, post-Panamax vessels began to enter the market in the mid-1990s. Just a decade later, vessel size has nearly doubled with the entry of the Emma Maersk into the world fleet. This vessel tops the 14,000 TEU mark. It is reportedly one-quarter mile in length and requires a crew of just 13 for its seaborne voyages (Davis, 2006). These larger ships are based on the economies of scale available with new shipping technologies and investments by container terminals at ports worldwide. This continued investment in container vessels and equipment supports projections for continued growth in container trade.
With the economies of size in vessels and the scale economies in an ever-expanding global container trade, containerization has become a competitive option for international shipping. Rates declined substantially over recent decades due to inland operational efficiencies and technological advances in the shipping industry. In addition, overall market demand for dry bulk vessels has made the container vessel option relatively more attractive for grain customers in active container ship corridors.
$20.00 $15.00 $10.00 $5.00 $0.00
Vessel Size, TEUs Source: Journal of Commerce
Figure 2. Container Vessel Rates for Early Ships The world intermodal traffic and capacity has grown substantially over recent decades (Figure 1). Total volume was estimated at just under 50 million TEUs in 1980 and has grown nearly 800 percent to 417 million TEUs in 2006. Leading shipping consultants expect this growth to continue, with predictions of 12 to 16 percent increase in capacity during each of 2007 and 2008 (Leach, 2007). Container supply is expected to outpace demand with growth projections of 9 to 11 percent expected each year in the slowing global economy.
Exporters of grains and other U.S. agricultural products have benefited from the expansion of global container trade. However, U.S. agriculture is competing with experienced container grain traders from Canada and Australia. In these countries businesses have long been involved in grain and oilseed container trade, while this is a relatively new market for many U.S. shippers. For example, the Canadian National Railroad specifically markets its container services as a product to Canadian grain customers in China; and has made recent investments related to its grain container business (Canadian National, 2006 and 2007). Canada has continued to show gains from its investment and commitment to containerization, but more recently the United States has had accelerated growth in this shipping method. An illustration of railroad container traffic for the United States and Canada shows the U.S. volumes growing at a faster rate in more recent years (Figure 3).
Figure 3. Railroad Container Traffic Trends in the United States and Canada Along with this increase in overall rail volume, the U.S. grain industry appears to be seeking a larger role in the market. The U.S. Department of Agriculture indicates volumes have been well ahead of shipment levels traditionally seen in the U.S. to Asia shipping corridor. Shipment levels in June 2007 are reported to be 200 percent above historical levels for the same month, and above historical highs for available data. The Asian markets are a primary customer for U.S. containerized grain (Vachal and Reichert, 2002). Industry reports lend further credit to these traffic trends. U.S. Wheat Associates reported the 2006-07 marketing year volume of wheat marketed via container nearly tripled 4
compared to the previous year. The U.S. Soybean Export Council, Inc. references Port Import Export Reporting Services (PIERS) in its discussion of growing container corn export volumes (Ratajczyk, 2005). The gains may be attributed to several market factors, including relatively high bulk shipping rates, an overall increase in the U.S. grain container market, imbalance in container trade with Asia, weaker U.S. dollar, and good U.S. crops. In addition, it has been suggested that faster payments associated with shorter transit times, relative to bulk, may also be contributing to the growth (Mongelluzzo, 2007).
Millions of TEUs
16.0 14.0 12.0 Export
8.0 6.0 4.0
Source: U.S. Department of Transportation, 2007b; U.S. Department of Transportation, 2007c
Figure 4. U.S. Ports Container Traffic Balance A large share of U.S. based container trade is attributed to consumer goods imported from Asian markets. This inbound container traffic flow remains well ahead of the export traffic creating a large imbalance (Figure 4). This traffic imbalance in some trade lanes has created opportunities to move lower-value goods, such as grains and feedstuffs, through these channels as “backhaul” goods. In addition, labor and other service issues at the West coast ports, which dominate these trade lanes, have encouraged companies to consider the viability of alternative ports and land bridges. In addition to taking advantage of the traffic imbalance, the economics of container-on-barge (COB) shipping alternative provides opportunity for U.S. exporters. It is estimated that shipping by COB can be a competitive alternative to inland rail options (Red, 2007). Illinois agriculture producers may have an opportunity to enter the dynamic international container market. With ready access to key intermodal yards at the Chicago gateway, a burgeoning market for smaller units and containerized agricultural products sets up a competitive and locational advantage along inland waterways. Primary operational modes 5
into this market are currently drayage and transload via the Chicago terminals. Established container pools or supplies in St. Louis or Kansas City, Memphis, or Decatur present opportunities for accessing the Asian backhaul market along with other trade lanes actively served through these inland ports. This study considers the opportunity for a container-on-barge facility along the Illinois River to integrate into the region’s international container market. Although the facility would consider diversity in product mix, it is assumed that the container shipments will be focused primarily on movements of local agricultural products. Container-on-Barge Basics Container-on-barge operations seek to utilize modal advantages in energy consumption, labor efficiencies, and environmental impacts to compete in markets where products are relatively less time-sensitive and further from destinations. The average barge can carry one ton about 500 miles per gallon of fuel, compared to about 200 miles for rail and 60 miles for truck (Figure 5). Barge capacity is 1,500 tons, which is equivalent to about 15 railcars or 60 trucks with their of 100 and 25 tons, respectively. The average revenue per ton-mile for barge is approximately 1/3 that of rail and 1/30 of truck for distances over 500 miles (U.S Department of Transportation, 2007b).
Figure 5. Modal Capacity Comparison Source: Port of Pittsburgh Commission, 2007
The typical COB uses an open hopper river barge that has the capacity to carry about 70 TEUs. Current COB operations are using existing jumbo hopper barges, which are capable of holding 72 TEUs stacked 3-high. Landside COB operation requirements are: ground storage (with sufficient ground compaction to support operations); cranes (or in some cases stackers); container forklift; good highway connections and a weigh station for trucks (Grier, 2007). The common truck weight for most states, Illinois included, is 80,000 pounds which is an important factor in promoting COB. For part of 2007, as the result of improper container loading and a BNSF derailment, BNSF applied strict restrictions on containers. Since then, the BNSF has twice changed its policy on weight 6
restrictions for 20- and 40-foot bulk agriculture containers. In January 2007 they limited a 20-foot to 40,000 pounds and a 40-foot to 48,000 pounds. This changed again in June, 2007 to 52,900 pounds and 67,200 pounds, respectively. The BNSF has also initiated strict agreements between themselves and the shippers based on lane balance and other restrictions. The limits were imposed because of the possibility that improper cargo loading and/or higher weight containers may cause derailments in a double stack configuration (Burlington Northern Santa Fe, 2008). The capability of barges and waterways to handle overweight containers is both an advantage and a possible constraint in terms of moving a container to or from a river loading site. On the Columbia River in the Pacific Northwest, over- or high-weight containers are loaded close to the river port and take advantage of weight exemptions within a certain distance of the port. Such overweight containers may effectively take more than one truck off the highway per container. In addition to shipper benefits in truck drayage costs, public benefits may be realized due to reduced congestion and energy consumption. This could be the case in Illinois. If the container can be loaded near or at the river port, containers can be loaded to the maximum of 52,900 and 67,200 pounds respectively. These loading weights can be taken advantage of, only if all movements in the chain can effectively handle these heavy containers.
LOCAL MARKET PROFILE Beardstown is an agricultural hub positioned along the Illinois River in west central Illinois. Beardstown is located in Cass county, which covers about 380 square miles and has a total population of about 13,770. The city of Beardstown accounts for about half of the county population with its 5,914 residents (U.S. Census, 2008). The marketing region and potential draw region for a Beardstown container-on-barge operation, is an extended geography that includes the surrounding counties of Brown, Mason, Menard, Morgan, Sangamon, and Schuyler. The region covers an area of 3,460 square miles (Figure 6).
Figure 6. Beardstown Market Area
Economic Activity A large component in Beardstown and the surrounding area’s economy is agriculture. Approximately 3 in 4 acres in the region is used in agriculture based on production information (U.S. Department of Agriculture, 2007). This compares to about 1 in 4 acres employed in agriculture for the entire U.S. The region’s primary agricultural crop
production includes corn, soybeans, and winter wheat.1 Corn accounts for a majority of the crop production in the market area, at 84 percent of total agricultural production between 2004 and 2007 (Figure 7). Soybeans are second in volume, accounting for 15 percent of the grains. Wheat production is minor at about one percent.
Figure 7. Composition of Market Area Crop Production, 2004 to 2007 Trends in acres planted for the three commodities over the most recent five years show a strong trend toward increasing corn production between 2001 and 2007 (Figure 8). In 2006, however, some corn acres were redirected to soybean and wheat production. This changed as the demand for corn based on the expanding ethanol industry pushed the price of corn higher relative to other crops during the spring of 2007. This incented producers to plant more corn and resulted in more acres in 2007. The after-harvest price swings for corn, soybeans and wheat have not yet determined what the spring of 2008 will bring, but high prices for wheat promoted the planting of winter wheat in southern areas. Where possible, this land will be double cropped with soybeans if weather and harvest conditions permit.
Although hay, sorghum, and oats are also grown in the market area, these commodities are not considered in this analysis because they are not primary commodities for container-on-barge due to local consumption.
Figure 8. Market Area Trends in Crop Production, 2001 to 2007
Ethanol production is growing all across the United States. The push for energy independence along with high fuel prices have assisted in the construction of ethanol plants at a record pace, especially in the Corn Belt. Iowa leads the nation in ethanol production capacity, but many states are adding to their ethanol capacity and Illinois is among them. Illinois has 881 million gallons of ethanol capacity from 6 currently operating plants (Table 1). Four more are under construction that will add another 291 million gallons of capacity, making Illinois third in state rankings for ethanol production capacity (Nebraska Energy Office, 2008). Table 1. Ethanol Plants in Illinois
City Decatur Peoria Pekin Sauget Canton Rochelle Palestine Hennepin Pekin Annawan State Total
Company Archer Daniels Midland Archer Daniels Midland Aventine Renewable Energy Center Ethanol Co. Central Illinois Energy LLC Illinois River Energy, LLC Lincolnland Agri-Energy, LLC Marquis Energy, LLC MGP Ingredients, INC Patriot Renewable Fuels, LLC
Capacity (Gallons Millions) 274 273 157
Under Construction (Gallons Millions)
54 37 50 48 100 39 881
A bushel of corn can produce at least 2.7 gallons of ethanol and an estimated 18 pounds of DG (distillers grain) co-product. The by-product or co-product of ethanol production is distillers grain, which is a valuable feed source. When existing plants are producing at capacity, the ethanol industry in Illinois will produce an estimated 3.9 million tons of DDGs (dried distillers grain). As the livestock industry sorts out the most efficient and effective feed ration for local use, the excess will be a candidate for export in containers as feed. Because of the large supply of distillers grain by-products (including DDGs) available to the feed and livestock industry, researchers at several Land Grant universities have been conducting experiments to evaluate the nutritional value of these by-products in order to develop feeding recommendations for dairy, beef, swine, and poultry (University of Minnesota, 2008). Livestock feeders recognize the value of DDGs as it provides an economical alternative and/or companion to other feed or feed grains. DDG research continues to evaluate and determine the best method to deliver this feedstuff into the feed market.
In addition to agricultural shipments and activity, the general demand for freight in the region may be considered by using County Business Pattern (CBP) data. The information that is published by the U.S. Census can be delimited to separate the service and government-based employment from goods-based employment that is more relevant for this discussion.2 CBP show that Cass county has its largest employment share in nondurable goods manufacturing (U.S. Census, 2007). The larger market region including surrounding counties also includes durable and other goods manufacturing.
Durable Goods Manufacturing Other Manufacturing Merchants Mining (except Oil & Gas) Nondurable Goods Manufacturing Specialty Truck Transportation
Figure 9. Leading Employment Numbers for Goods-Based Industries by County, 2005 (U.S. Census, 2007) More specific detail regarding business activities in the Beardstown market area are included in Table 2. The composition of the market area economy is based on the North American Industry Classification (NAICS) employee numbers. All industries employing at least 100 employees are included in the table. These industries represent over 99 percent of all registered business employment in the market area. The data shows approximately 33 percent are freight and transportation associated industries. General merchandise stores, specialty trade contractors, and wholesalers top the list; accounting for 37 percent of this group. 2
County Business Patterns data are extracted from the Business Register, which is the U.S. Census Bureau's file of known companies. 12
Table 2. Business Activities in the Beardstown Market Area (Cass, Brown, Mason, Menard, Morgan, Sangamon & Schuyler counties), Based on Employment North American Industry Classification Employees Freight and Transportation Associated Industries General Merchandise Stores 3,367 Specialty Trade Contractors 3,021 Merchant Wholesalers, Nondurable Goods 2,570 Merchant Wholesalers, Durable Goods 2,111 Motor Vehicle and Parts Dealers 1,999 Food and Beverage Stores 1,701 Health and Personal Care Stores 1,390 Clothing and Clothing Accessories Stores 1,354 Building Material and Garden Equipment and Supplies 1,317 Gasoline Stations 1,243 Construction of Buildings 1,206 Printing and Related Support Activities 1,103 Machinery Manufacturing 1,062 Truck Transportation 1,008 Miscellaneous Store Retailers 904 Heavy and Civil Engineering Construction 805 Electronics and Appliance Stores 597 Sporting Goods, Hobby, Book, and Music Stores 596 Furniture and Home Furnishings Stores 453 Computer and Electronic Product Manufacturing 422 Transit and Ground Passenger Transportation 357 Fabricated Metal Product Manufacturing 334 Wood Product Manufacturing 299 Nonstore Retailers 240 Furniture and Related Product Manufacturing 196 Nonmetallic Mineral Product Manufacturing 157 Plastics and Rubber Products Manufacturing 105 Professional, Administrative, and Service Industries Food Services and Drinking Places 8,117 Ambulatory Health Care Services 6,826 Hospitals 6,751 Professional, Scientific, and Technical Services 5,376 Administrative and Support Services 5,002 Religious, Grantmaking, Civic, Professional, and Services 4,839 Insurance Carriers and Related Activities 3,796 Nursing and Residential Care Facilities 3,080 Credit Intermediation and Related Activities 2,746 Social Assistance 2,296 Educational Services 2,113 Telecommunications 1,625 Personal and Laundry Services 1,275 Repair and Maintenance 1,233 Accommodation 1,229 Amusement, Gambling, and Recreation Industries 1,092
Table 2. Business Activities in the Beardstown Market Area (Cass, Brown, Mason, Menard, Morgan, Sangamon & Schuyler counties), Based on Employment Publishing Industries (except Internet) Management of Companies and Enterprises Rental and Leasing Services Real Estate Waste Management and Remediation Services Total
954 814 631 497 223
Source: U.S. Census, 2007 The broad overview of regional agricultural and business activities provides a basis for understanding potential inbound and outbound demand for container service. In addition, it is important to understand the infrastructure and regional metropolitan center proximity since these often serve as a multimodal logistics hubs in the market. Infrastructure Illinois has a large complex of highway and rail infrastructure that is largely associated with Chicago and its early role in domestic waterborne passenger and goods transport (Cronin, 1991). It was long ago established as the primary rail gateway between the eastern and western traffic flows across the United States. The interstate system, which was completed in the 1950s, reinforced Chicago’s role as a freight gateway (Figure 11 and Figure 12). Beardstown is within market proximity to several multimodal metropolitan logistics hubs beyond Chicago, including St. Louis (115 miles), Kansas City (290 miles), and Memphis (410 miles) as illustrated in Figure 10.
Beardstown Kansas City
$ St. Louis
Figure 10. Regional Metropolitan and Export Intermodal Hubs
Rail and Highway Beardstown is located about 235 miles southwest of Chicago. Chicago’s historical role as a gateway to the west is embodied in its vast transportation infrastructure and associated traffic issues. Logistics Park at Joliet, Illinois, which is about 40 miles southwest of Chicago along Interstate 55, is a premier intermodal facility on the Burlington Northern Santa Fe (BNSF) and would provide one potential drayage access point for a Beardstown facility. Decatur, Illinois also offers a potential drayage access point on the Norfolk Southern Railroad.
Chicago 88 Logistics Park 80 39 74 Peoria 55 Beardstown
Interstate Railroad, Width Indicate Density Waterway
Figure 11. Major Transportation Infrastructure Map Beardstown is served by the BNSF. Container service for the Decatur businesses, that have been mentioned as potential business for the facility, are served by the Norfolk Southern Railroad (NS). The NS is a small railroad in terms of total volumes at about 6 million carloads per year, compared to the BNSF that has 9 million carloads per year. Therefore, the NS may be more responsive to what may be viewed as small volume intermodal businesses (American Association of Railroads, 2007).
BNSF CN CPRS CSXT IMRR KCS NS UP
Figure 12. Major Rail Lines and Beardstown Market Waterway Container-on-barge offers an attractive alternative to congested road and rail routes. With its location on the river, a Beardstown facility may have a unique opportunity to access container supply and delivery point without long-distance drayage through its barge site at mile 87 on the Illinois River (Appendix A). While drayage distances over 300 miles are traveled by some shippers in the Midwest, a competitive advantage certainly exists for those in close proximity to major hubs. The potential to traverse the distance through water alternatives has also been proven a competitive advantage where it can generate a critical mass for regular service. The threshold for service, or critical mass, will vary based on market criteria established primarily by the barge company and steamship line. Container-on-barge has a long history in many European nations, and is also well developed on the Columbia River system in the U.S. Pacific Northwest (Grier, 2007). An Alabama study identified 15 U.S. businesses that have operated container-on-barge lines in inland and coastal waterways (Hanson Professional Services, 2007). Of the ten inland operations, only four remain in operation. Tidewater marine and Foss Maritime operations are confined to the Pacific Northwest. Within the Beardstown’s locale, Osprey Line, Sea Point, and American Commercial Barge Lines (ACBL) are the current container-on-barge enterprises. Both these enterprises connect gulf ports with inland river terminals on the Mississippi, Illinois, and Ohio waterways. 17
Osprey has been in operation for over 30 years, offering regular scheduled service between Memphis and New Orleans. In addition, Osprey has service to several intercoastal locations including the inland river terminals on the Mississippi, Illinois, and Ohio river systems on negotiated terms. Osprey now has over 30 barges in COB service. In addition, Kirby Corporation, which owns a majority share in Osprey, has integrated some of the COB into its linehaul operations that move regularly throughout the inland waterways. Sea Point is a relatively new enterprise and is working to develop a large transshipment facility at the mouth of the Mississippi River. While the project is still in its infancy, it has begun operating limited container-on-barge service for the inland portion of its business in cooperation with Ingram Barge. The Illinois River is open year-round and does have grain and containers in its traffic mix. Illinois River traffic averaged 44 million short tons between 2001 and 2006 (Figure 13). Traffic levels have trended slightly upward for the Illinois River. Downbound traffic outweighed upbound in four of the five years. Upbound accounted for 54 percent of the volume in the most recent year. Although a relatively recent and small-scale segment of this traffic, the presence of container traffic suggests that the potential exists to market grain via container-on-barge using the Illinois River.
1,000 Short Tons
45,000 40,000 35,000 30,000
20,000 15,000 10,000 5,000 0 2001
Figure 13. Illinois River Traffic Levels
Grain Movements The barge industry is a large originator of grain from the Illinois River Region. Based on the Army Corp of Engineers reported traffic from 2001 to 2006, grain averaged 15.6 million tons or about 600 million bushels annually via barge. Corn is the largest segment in this traffic accounting for about three-quarters of the river grain traffic. Primary barge loadout facilities are listed in Appendix B. Table 3. Grain Traffic on the Illinois River, 2001 to 2006 Commodity Thousand Short Tons Year Oilseeds Wheat Corn Soybeans NEC Other 2001 287 12,120 4,425 37 13 2002 372 12,872 4,705 70 33 2003 323 12,253 3,779 77 71 2004 452 11,528 2,732 67 18 2005 188 9,207 2,604 101 2
Total 16,882 18,052 16,503 14,797 12,102
Other includes rice, barley, rye, oats, and sorghum grains. Source: Army Corp of Engineers, 2007a
Other Container-on-Barge Relevant Traffic Empty container traffic is growing on the Illinois River (Table 4). These volumes estimated in analysis of the U.S. Waterborne data are greater than reports generated through the U.S. Corp of Engineers OMNI Web Reports (Table 5). Table 4. Estimated Empty Container Volume on the Illinois River from Waterborne Commerce Data Year Thousand Tons Estimated Containers 2004 15 6,800 TEUs 2005 38 17,200 TEUs Note: No tons reported prior to 2004. Source: Army Corp of Engineers, 2007a Estimated Container Weight of 2.2 tons
An explanation for differences was not determined in reviewing the two data sources so both estimates are included for consideration. Due to the more current information available through the OMNI query system – the waterborne commerce data has over a year lag before it is released to the public – and the larger volumes identified in the older waterborne data, it may be of value view both sources in understanding the container activity on U.S. waterways. Both datasets do indicate empty container traffic on the Illinois River. The complete public waterborne set suggests more longevity and higher volumes for empty container activity.
Table 5. Illinois River Container Volume from the OMNI Waterborne Traffic Reports Container Traffic (Class P92 and Class 92) Barges Tons 2004 None 0 2005 Up 3 700 Down 1 Empty Containers Down 3 3,300 Down 3 3,600 2006 Up 0 Down 3 Empty Containers Down 6 7,120 Down 2 2,225 2007 Up 0 Down 1 Empty Containers Source: U.S. Army Corp of Engineers, 2007b.
Understanding local market product mix and current infrastructure assets is important in discussing the potential for developing an inland container-on-barge facility. Previous and successful existing barge operations that serve container markets, increasing capacity constraints in traditional rail-container corridors, and predicted continued growth for containerization are important market factors. The background information presented in this section provides context for discussing current market activities and the potential for developing a container-on-barge facility at Beardstown.
U.S. CONTAINER INDUSTRY AND GRAIN ACTIVITY
50 45 40 35 30 25 20 15 10 5 -
450 400 350 300 250 200 150 100 50 -
World, Million TEU
U.S., Million TEUs
The U.S. container industry has seen substantial growth over recent years as a part of the global trade network. World container traffic has tripled since 1995, to reach over 450 million TEUs. Expansion in the U.S. market has generally lagged behind that of the world market, but still shows impressive gains. The rapidly increasing volume has created both opportunities and challenges.
Figure 14. U.S. Container Traffic, 1995 to 2006 Source: U.S. Department of Transportation, 2007a
Activity in the U.S. intermodal container market has shifted somewhat during this era of expansion. The system, which once contained over 2,000 intermodal ‘ramps,’ is now largely based in a network of large intermodal hubs that are positioned in close proximity to population centers and ports. The network tends toward a cluster organization as congestion, land values and land use issues limit the growth potential at specific sites. Large inland distribution centers augment traffic flows in and out of the largest ports and population centers. Figure 15 illustrates general densities in rail container origins in 2001 and 2006. The Chicago gateway is surrounded by a cluster of Bureau of Economic Analysis (BEA) county groupings with container origins. The visual overlay of the map onto the Class I rail intermodal hub and route systems illustrated in Figure 16 and Figure 17 creates a schematic for grasping current market activity, connectively, and primary hub access points. The land bridge activities in Chicago as a primary east-west trade gateway are evident in the high level of activity and large number of empty containers in the traffic mix for both years.
2000 Range per BEA: 80 to 42 Million Tons
2006 Range per BEA: 400 to 48 Million Tons
1th Quartile 2nd Quartile 3rd Quartile 4th Quartile
Figure 15. Rail Origin Volumes, 2000 and 2006
Additional details regarding container volume trends for BEAs between 2001 and 2006 are provided in Appendix D. A relative and absolute reduction in the Minneapolis-St. Paul, MN-WI-IA BEA rail container volume is evident because that BEA shifts from the 1st to the 2nd quartile among the ranking of BEAs by rail container volumes. Among other inland ports in this region, growth in the Kansas City, MO-KS (BEA 100) is illustrated as a shift of this BEA from the 4th to 3rd quartile.
Figure 16. BNSF International Intermodal Network Source: Pitcher, 2007
Figure 17. Union Pacific Intermodal System Source: Union Pacific Railroad, 2007
Trends in the area surrounding the local Beardstown area show the expected growth that anecdotal evidence suggested. Volumes increased 20 percent over the sixyear period. While the Chicago-Gary-Kenosha, IL-IN-WI BEA volumes grew about 17 percent, the volumes attributed to the Memphis, TN-AR-MS-KY and Kansas City, MOKS BEAs grew by nearly 40 percent. Beardstown is located in BEA 97, along with Decatur (Appendix C). This BEA does not show container origins for 2001 to 2006 railroad shipments. Although some containers may originate from the BEA, volumes may be too small to guarantee confidentiality so they are grouped into the aggregate “Other” value for unspecified origins. The large volume originated within 400 miles of Beardstown presents several opportunities for accessing large and well-established inland container pools. Table 6 shows substantial growth at in the Memphis BEA and a relatively stable rail container traffic level for the St. Louis BEA. Other locations seem rather unstable and minor, given the activities in the larger system, and may not offer sustainable empty container supplies.
Table 6. Container Volume Trends for Region, 2001 to 2006 Origin BEA
Chicago-Gary-Kenosha, IL-IN-WI 64 40,929,366 Memphis, TN-AR-MS-KY 73 4,667,700 Kansas City, MO-KS 99 3,027,720 St. Louis, MO-IL 96 1,968,167 Louisville, KY-IN 70 20,120 Paducah, KY-IL 72 Des Moines, IA-IL-MO 100 2,160 Evansville-Henderson, IN-KY-IL 69 Indianapolis, IN-IL 67 760 Champaign-Urbana, IL 68 Nashville, TN-KY 71 4,880 Davenport-Moline-Rock Isld, IA-IL 102 7,962 Total 50,628,835 Note: BEA Map in Appendix C Source: U.S. Department of Transportation, Various Years
40,901,536 5,728,247 3,274,673 2,005,149 31,160 88,593 48,738 87,507 8,280 4,200 52,178,083
2003 2004 Tons 42,300,988 44,405,884 5,478,486 5,588,697 3,030,624 3,353,641 2,049,574 1,751,820 662,779 34,120 68,634 2,160 51,880 7,302 118,640 173,920 1,160 2,449 53,870,211 55,212,547
47,547,250 5,752,349 3,853,992 1,942,077 103,880 2,000 1,760 59,203,308
48,026,659 6,485,431 4,185,683 2,054,349 157,160 4,788 2,400 1,207 1,200 1,200 60,920,077
Corridor flows are an important factor in container routing. The top three origin BEAs in the region, are detailed in Table 7, with regard to destination for container traffic originated. Access through the Beardstown market area is through container yards, where shipping lines position containers inland to the degree that these can efficiently and costeffectively be moved back into their shipping corridors. Understanding current corridor flows is a good indicator for shipping line decisions regarding these flows. The Los Angeles-Riverside-Orange County, CA-AZ BEA is, as expected, number one among destinations for the top volume BEA hubs in the Beardstown region. It is the largest U.S. intermodal port (U.S. Department of Transportation, 2007a). Other important container channels for the Beardstown market area are New York-New Jersey, Seattle-Tacoma, and San Francisco, based on the origin-destination information for rail container shipments from regional hubs. 24
Table 7. Public Waybill Container Traffic Summary Origin BEA Destination BEA Chicago-Gary-Kenosha, IL-IN-WI Los Angeles-Riverside-Orange Cnty, CA-AZ New York-New Jersey-Long Island, NY-NJ-CT-PA-MAVT Seattle-Tacoma-Bremerton, WA San Francisco-Oakland-San Jose, CA Dallas-Fort Worth, TX-AR-OK Atlanta, GA-AL-NC Houston-Galveston-Brazoria, TX Kansas City, MO-KS Memphis, TN-AR-MS-KY Chicago-Gary-Kenosha, IL-IN-WI Total Among Top BEAs All Destinations Memphis, TN-AR-MS-KY Los Angeles-Riverside-Orange Cnty, CA-AZ San Francisco-Oakland-San Jose, CA Atlanta, GA-AL-NC Memphis, TN-AR-MS-KY Chicago-Gary-Kenosha, IL-IN-WI Seattle-Tacoma-Bremerton, WA Houston-Galveston-Brazoria, TX New York-New Jersey-LongIsland,NY-NJ-CT-PA-MA-VT Kansas City, MO-KS Total Among Top BEAs All Destinations Kansas City, MO-KS Los Angeles-Riverside-Orange Cnty, CA-AZ San Francisco-Oakland-San Jose, CA New York-NewJrsy-LongIsland,NY-NJ-CT-PA-MA-VT Seattle-Tacoma-Bremerton, WA Chicago-Gary-Kenosha, IL-IN-WI Dallas-Fort Worth, TX-AR-OK Atlanta, GA-AL-NC Houston-Galveston-Brazoria, TX Memphis, TN-AR-MS-KY Total Among Top BEAs All Destinations
Tons 13,803,706 4,087,800 4,074,782 3,765,912 1,232,147 615,080 245,760 229,997 94,440 53,362 28,149,624 48,026,659 59% 2,858,962 627,869 498,200 201,600 176,360 163,880 54,560 43,600 3,920 4,628,951 6,485,431 71% 1,780,267 478,644 216,560 178,725 165,887 59,095 44,800 10,480 1,760 2,936,218 4,185,683 70%
Note: BEA Map in Appendix C Source: U.S. Department of Transportation, Various Years
The commodity mix for these container origins may also provide insight regarding potential target markets for building local outbound and inbound container business. As
expected, the traffic is dominated by empty containers as per Chicago’s gateway role, accounting for about one-third of the rail container originations from the region. Rail shipment data through 2006 suggest empty container volumes are growing (Appendix E). Anecdotal evidence, however, was offered by individual shippers that these containers are being returned loaded at an increasing rate in 2007 as bulk shipping rates have increased, resulting in relatively less expensive shipping rates for containers. Other prominent commodities in the mix include food and kindred products at 15 percent, along with waste and scrap and transportation equipment at 11 percent each. The local mix for BEAs included in Table 6 are illustrate in Figure 18. The ten largest-volume products account for 82 percent of the container volume for which the product is specified. Among these ten, empty containers are the single largest component in the market.
Farm Products 3%
Rubber/ Plastics 3%
Apparel 4% Pulp/Paper 6%
Empty Containers 31%
Freight Fwdr 8%
Transport Eqpt 11%
Chemical/ Allied 8% Waste/Scrap 11% Source: U.S. Department of Transportation, Various Years
Figure 18. Rail Container Traffic by Major Commodity Groups, 2006
Table 8 offers more specific detail regarding the traffic trends for the top volume BEAs in the Beardstown market region. The miscellaneous mixed freight is the largest share of container business reported by all BEAs. The aforementioned empty container traffic component expanded for all BEAs, and remains a relatively large share of the Memphis BEA compared to the traffic mixes for Chicago and Kansas City BEAs. Table 8. Container Shipments Originated from Top Volume BEAs in Beardstown Market Region
Misc Mixed Empty Containers Freight Forwarder Food/Kindred Transport Eqpt Chemical/Allied Pulp/Paper Sm Pkg Freight Primary Metals Apparel Rubber/Plastics Electric Machnry Printed Matter Misc Freight Fabricated Metals Furniture Mail Misc Manufactrg Waste/Scrap Lumber Shipper Assn Petro/Coal Prod Machinery Concrete Product Farm Products Non-Metallc Ores
ChicagoGaryKansas Memphis, Kenosha, City, TN-ARIL-IN-WI MO-KS MS-KY Share of All Container Traffic 73.4% 87.7% 80.9% 5.9% 5.2% 12.2% 4.5% 0.0% 0.0% 3.5% 1.3% 1.0% 2.7% 0.8% 2.1% 2.1% 3.5% 0.3% 1.4% 0.0% 0.0% 1.2% 0.0% 0.0% 1.0% 0.0% 0.0% 1.0% 0.0% 1.6% 0.6% 0.0% 0.9% 0.6% 1.1% 0.0% 0.4% 0.0% 0.0% 0.3% 0.0% 0.0% 0.3% 0.0% 0.0% 0.2% 0.0% 0.0% 0.2% 0.0% 0.0% 0.2% 0.0% 0.0% 0.1% 0.4% 0.1% 0.1% 0.0% 0.2% 0.1% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.7% 0.0% 0.0% 0.0%
ChicagoGaryKansas Memphis, Kenosha, City, TN-ARIL-IN-WI MO-KS MS-KY Share of All Container Traffic 64.8% 77.9% 76.9% 5.5% 4.3% 11.8% 5.4% 7.3% 2.4% 5.2% 0.0% 0.0% 4.0% 0.0% 0.8% 2.4% 2.6% 0.2% 1.6% 0.0% 0.5% 2.0% 0.0% 0.0% 1.0% 0.0% 0.0% 1.0% 1.0% 0.9% 0.9% 0.0% 1.5% 0.6% 0.6% 0.0% 0.8% 0.0% 0.0% 0.5% 0.0% 0.0% 0.3% 0.0% 0.0% 0.6% 0.0% 0.0% 1.2% 0.0% 0.0% 0.3% 0.0% 0.0% 0.8% 0.1% 0.1% 0.4% 0.1% 1.0% 0.4% 0.0% 0.0% 0.1% 0.0% 0.0% 0.3% 0.0% 0.0% 0.1% 1.5% 0.1% 0.0% 0.2% 1.0% 0.0% 4.5% 2.8%
Total Tons 48,026,659 4,185,683 6,485,431 Note: BEA Map in Appendix C Source: U.S. Department of Transportation, Various Years
Table 9 shows traffic trends for the BEAs in the Beardstown market region for agriculture products. Chicago, Memphis, and Kansas City all have measurable volumes of agricultural rail container shipments. St. Louis has an average of around 2 million tons,
but has not experienced growth as have the other three large BEAs. The volume for this BEA slipped to 1.8 million tons in 2006.
Table 9. Market Rail Container Originations: Agricultural Products, Trends between 2001 and 2006 Average Average Origin BEA BEA 2001 to 2003 2004 to 2006 Change Tons Chicago-Gary-Kenosha, IL-IN-WI 64 41,377,297 46,659,931 13% Memphis, TN-AR-MS-KY 73 5,291,478 5,942,159 12% Kansas City, MO-KS 99 3,111,006 3,797,772 22% St. Louis, MO-IL 96 2,007,630 1,916,082 -5% Louisville, KY-IN 70 238,020 98,387 -59% Paducah, KY-IL 72 24,474 Na Evansville-Henderson, IN-KY-IL 69 33,539 3,503 -90% Indianapolis, IN-IL 67 68,969 987 -99% Nashville, TN-KY 71 2,013 816 -59% Des Moines, IA-IL-MO 100 30,971 800 -97% Champaign-Urbana, IL 68 60,733 400 -99% Davenport-Moline-Rock Island, IA-IL 102 4,054 -100% Note: BEA Map in Appendix C Source: U.S. Department of Transportation, Various Years
Within the grain and other agricultural field product industry, additional detail is provided regarding the rail container commodity mix. Cotton is the largest single component in the traffic mix, accounting for 45 percent of the U.S. traffic between 2004 and 2006. Soybeans and corn, primary product targets for the Beardstown origin, rank 4th and 12th among commodities in the mix (Figure 19).
Cotton LawnGrassSeeds CottonSeeds Soybeans Hay Grain,NEC Potatoes Hay Ex Chopped SunflowerSeeds Rice SweetPotatoes Corn Oats Barley FieldCrops,NEC Wheat Peanuts Popcorn SugarCane Alfalfa Ex Chopped Flax Rye
275,847 81,841 61,578 50,345 46,294 29,106 22,840 13,806 11,840 6,653 2,907 2,773 1,907 1,906 1,173 1,013 920 560 480 480 320 133 0
150,000 200,000 250,000 300,000
Tons Source: U.S. Department of T ransportation, Various Years
Figure 19. Grain and Other Agricultural Field Product Container Exports, Average 2004 to 2006
As with the U.S. traffic, cotton is top among farm products originated from the Beardstown market region (Table 10). Cotton accounted for about two-thirds of the grain container traffic originated between 2004 and 2006. Cotton, rice, and soybeans are consistently in the mix during each of the three years. Previous years did include some wheat shipments. Table 10. Grain Product Container Originations from the Beardstown Market Region 2004 2005 2006 Product Tons Cotton 42,244 13,120 43,760 Corn 4,120 3,400 1,280 Rice 640 4,200 400 Soybeans 10,961 10,242 12,970 Total
Note: Market Area BEAs specified in Table 6 Source: U.S. Department of Transportation, Various Years
The final data summary provided for this rail container section is the origin-destination pair information for the BEAs reporting the largest grain volume. The Lubbock, Texas BEA ships a large volume, presumably of cotton, to the Los Angeles BEA. SeattleTacoma-Bremerton, Washington is a primary recipient for several of the Midwest grain container BEAs (Table 11). This traffic fits well with the agricultural container traffic generated from the Columbia-Snake region that is also tributary to this BEA. The next section shifts from the inland rail container traffic to grain container shipments in the U.S. export market. Table 11. Rail Grain Container Freight by Origin and Destination Pairs, 2006 Origin BEA
Destination BEA Los Angeles-Riverside-Orange Cnty, CA-AZ Other
Minneapolis-St. Paul, MN-WI-IA
BEA 160 na na
Minneapolis-St. Paul, MN-WI-IA 107 879 to Note: BEA Map in Appendix C Source: U.S. Department of Transportation, Various Years
GRAIN AND FIELD CROP CONTAINER EXPORT ACTIVITY U.S. producers and grain merchants have shown increasing interest in containerized transportation for their products. The Port Import Export Reporting Service, with the Journal of Commerce, collects and markets information from U.S. ports regarding export activity. This information shows a substantial increase in grain exports over the past five years. Figure 20 shows reported container activity for ports (MARAD and PIERS) and rail (USDOT) between 2001 and 2006, to the extent data is available. Although the grain export volume remains small in absolute terms, the growth path has a strong positive slope in recent years. While all port container volumes have grown by about 50 percent over the five year period, grain exports have expanded by 130 percent in 2006 compared to 2001 levels. 2.50 PIERS Grain
Activity Index, 2001=1.0
MARAD All Container US DOT Rail Container
US DOT Rail Grain Container AAR Rail Container
Source: U.S. Department of Transportation, 2007b and 2007c; American Association of Railroads, 2007; Journal of Commerce, Various Years
Figure 20. Reported U.S. Container Activity, Various Sources
The origins for the PIERS data are specified as the shipper reported state residence. These origin reports may include freight forwarder or non-vessel operating common carrier (NVOCC) addresses as the shipper. Figure 21 shows the distribution of states grain container export activity based on quartiles that distinguish the lowest to the highest volumes in four groups. The most active states in close proximity to the Beardstown market include Illinois and Missouri. Illinois is second behind Minnesota in volume, considering the shipper residence (Figure 21).
1th Quartile 2nd Quartile 3rd Quartile 4th Quartile None Reported Source: Journal of Commerce, 2007
Figure 21. Grain and Field Crop Container Export Activity between 2005 and 2007, by State Indicated as Shipper Location
The trends for individual states in the top quartile are presented in Table 12. Illinois has a strong positive trend in grain exports, as does the state of Minnesota. California and Washington are also among states with the largest volumes, but less consistency is evident in their grain container shipment levels. Kansas, which is fifth among all states, has shown the same consistency as Illinois and Minnesota in annual increases through 2006. While Kansas slowed, Wisconsin and Indiana showed strong volume increases for 2007 compared to any of the previous years. The large-volume 2007 grain export year may have initiated the move toward a market mass that allows containerized grain shipping to stabilize and grow as a functional sector in the U.S. grain market. Industry investment and future years’ activity will provide information to prove or disprove the move toward longer-term sector development.
Table 12. Grain Container Export Trends, Largest Volume Originating States 2001 2002 2003 2004 2005 2006 2007 Minnesota 9,198 10,093 6,609 12,918 38,343 57,359 143,592 California 28,896 29,726 24,473 28,259 60,330 42,644 96,915 Illinois 5,198 5,894 10,080 13,622 25,023 46,373 100,033 Washington 10,041 10,264 8,847 24,969 31,327 30,081 33,570 Kansas 8,716 8,024 10,058 11,744 14,168 27,428 21,532 Missouri 4,173 5,469 8,683 7,974 8,829 9,460 17,711 Wisconsin 929 1,018 847 1,705 1,236 5,915 24,633 Nebraska 2,891 3,018 5,268 7,586 8,406 7,911 7,496 New Jersey 4,178 2,669 3,293 5,750 6,627 6,761 6,613 Florida 7,247 6,908 5,377 6,556 6,318 6,150 6,336 Indiana 1,413 1,247 1,627 2,204 3,653 3,463 10,458 Source: Journal of Commerce, Various Years
Within the grain and unprocessed agricultural container traffic movements tracked by Shipper and Exporter Services, U.S. Department of Agriculture (USDA), the volumes originated from Illinois are comprised largely of soybeans and corn. The trends for these two grain products are illustrated in Figure 22. Increasing volumes of both these products should continue in 2007 given the recent reports by USDA regarding the strength in the grain container export market.
Figure 22. Illinois Corn and Soybean Container Exports
Detail about these trends, as well as information regarding other grain and agricultural field products are included in Table 13 and may be useful in identifying potential products for a Beardstown COB facility. Beyond the previously mentioned, the animal feed component suggests that DDGs, which have been mentioned as a potential container export product, may fit into the product mix for international customers served through the Beardstown market region. In addition, wheat also shows notable volume for export from Illinois at 3,717 TEUs, 10-fold its previous year’s volume.
Table 13. Illinois Shipper Grain and Other Agricultural Field Product Container Exports, 2001 to 2007 2001
2003 TEUs 2,265 348
Soybeans, Whether or Not Broken Corn (Maize),Other than Seed Corn Residues Of Starch Mfr and Similar Residues Animal Feed Prep Except Dog or Cat Food Groats and Meal of Corn (Maize) Bran Sharps & Other Residues Derived from Millng Grains Worked Etc, of Cereal, Nesoi Corn (Maize) Flour Beans Nesoi Dried Shelled, Including Seed Wheat (Other Than Durum Wheat), and Meslin Wheat or Meslin Flour Peas, Dried Shelled, Including Seed Kidney Beans & White Pea Beans, Dri Shel, Inc Grain Sorghum Wheat Gluten, Whether or Not Dried Cereal Flours, Nesoi Groats and Meal of Oats Hop Cones, Ground, Powdered or In Pellets Malt, Not Roasted Barley Groats and Meal of Cereal, Nesoi Cereals (Not Corn) in Grain Form, Prepared Lentils, Dried Shelled, Including Seed Oats
12 20 264
29 82 183
18 52 170
17 496 203
71 67 171
736 566 341
517 1,226 258
7 389 4
12 372 1
17 426 3
65 415 4
34 207 6
239 172 53
3,717 201 36
48 56 30
83 1 3 37
78 16 6 31
28 38 58 17 2
10 25 87 13 26
50 49 40 13 10
38 45 121 11 24
8 2 2 395
14 3 20
13 20 13
1 5 16
8 4 2 2
4 0 19 2
2 2 -
Total Source: Journal of Commerce, Various Years
Regarding the ultimate destination as a potential means for targeting market relationships that fit into existing international trade corridors for the grain container exports, Figure 23 illustrates the distribution for product to the top 10 importers for all U.S. grain container exports. These importers account for 75 percent of all containerized grain and field crop exports. China is the largest among import volumes, moving up to lead Japan in the most recent three years, from 2005 to 2007, as it began expanding grain imports through this mode. It accounted for an average 41 percent of the market between 2005 and 2007. Japan accounted for an average 24 percent of the market for the same years. With the exception of Indonesia and Venezuela at 7 and 5 percent, respectively, the remaining countries consume between 2 and 4 percent of U.S. containerized grain exports.
Figure 23. Top 10 Import Countries for U.S. Grain and Field Crop Exports, Average Share 2005 to 2007 Many ports are involved as receptors for U.S. grain and field crop exports. The leading ports are listed, with trends, in Table 14. These ports, which handled a minimum 2,000 TEUs in 2007, account for approximately 81 percent of the market. The top three ports are in China considering activities for the most recent year. While Kaohsiung and Taichung have traditionally played a role in the market, their size grew considerably in 2007 compared to previous years. Kaohsiung was the customer in an estimated 31 percent of all U.S. containerized grains and field crop export volume between 2005 and 2007. Taiwan entered the market as a much more substantial importer in using the container mode for U.S. grain and field crop purchases during recent years. Indonesia also has several ports that increased activities in U.S. grains between 2006 and 2007. As overall world market trade activity slows, strong growth areas such as the U.S. grain container market will be encouraged to increase their use of this mode in the future. The lower value of these products, however, makes it imperative that major container corridor
routes, for products and repositioning, are understood. These products provide the shipping lines with an opportunity to recover a portion of the container repositioning costs. The economics for this backhaul depend on dynamic market factors and additional time required to service the backhaul product. Table 14. Trends for Top Ports for U.S. Grains and Field Crop Exports Port
KAOHSIUNG TAICHUNG TAIWAN TOKYO SURABAYA BUSAN JAKARTA MANILA SAN JUAN HONG KONG NAGOYA YOKOHAMA KOBE LAEM CHABANG BELAWAN DELI PT KELANG SEMARANG OTHER OSAKA BANGKOK HO CHI MINH SYDNEY SINGAPORE OTHER KWANGYANG KEELUNG PENANG HAKATA
CHINA CHINA CHINA JAPAN INDONESIA KOREA REP INDONESIA PHILIPPINES VENEZUELA HONG KONG JAPAN JAPAN JAPAN THAILAND INDONESIA MALAYSIA INDONESIA INDONESIA JAPAN THAILAND VIETNAM AUSTRALIA SINGAPORE JAPAN KOREA REP CHINA MALAYSIA JAPAN
3,240 1,150 10,972 1,103 3,774 1,122 1,807 7,940 2,245 4,914 6,215 5,218 718 616 2,414 226 6,293 2,521 505 1,038 654 10 329 1,457 1,424 1,461
4,480 1,624 8,721 1,605 4,592 1,818 2,089 7,885 2,463 4,763 5,046 4,891 516 693 2,430 405 4,825 2,317 568 1,699 596 336 1,628 1,105 1,473
19,742 6,221 10,821 3,524 5,011 2,781 3,187 9,832 4,978 4,494 5,039 5,760 1,316 1,371 3,633 686 5,270 2,453 638 2,735 888 599 1,629 957 2,411
2005 2006 TEUs 63,416 88,455 15,084 20,688 3,686 13,169 10,802 8,917 6,036 5,327 8,041 7,134 6,012 4,449 7,515 9,447 1,387 5,704 6,002 5,677 5,632 5,178 5,783 5,206 4,822 4,041 3,854 4,081 4,342 3,945 2,859 2,670 1,561 586 4,746 3,198 3,330 4,054 1,796 2,640 2,621 3,287 1,153 924 3,878 512 1,430 2,147 2,439 1,721 1,718 2,938 2,079
Avg 2005 to 2007
179,470 57,310 42,521 9,356 12,891 12,786 9,525 7,516 7,762 6,139 5,254 5,216 5,426 6,104 5,180 4,974 7,280 10,669 2,624 3,095 5,395 3,350 6,609 3,679 5,584 2,715 3,735 1,923
110,447 31,027 15,402 11,109 9,281 8,718 7,557 6,493 6,199 5,948 5,521 5,392 5,151 4,666 4,534 3,926 3,837 3,752 3,523 3,493 3,277 3,086 2,895 2,519 2,509 2,434 2,391 2,313
Regarding the port specific detail for corn export volumes moved to Kaohsiung, China have increased substantially in recent years. The port of Tiachung, China has also experienced an increase in grain container traffic that has its origins in the United States. Japan’s imports are spread rather evenly among four ports, including Yokohama, Osaka, Nagoya, and Kobe. The ports listed in Table 15 account for 95 percent of all U.S. corn exported via container in 2007. Table 15. Top 15 Destination Ports for U.S. Containerized Corn Shipments, 2002 to 2007 Port
KAOHSIUNG CHINA TAICHUNG CHINA TAIWAN CHINA BUSAN KOREA REP HONG KONG HONG KONG BELAWAN DELI INDNSIA PENANG MALAYSIA PT KELANG MALAYSIA JAKARTA INDONESIA HO CHI MINH VIETNAM TOKYO JAPAN INCHON KOREA REP KWANGYANG KOREA REP SINGAPORE SINGAPORE KOBE JAPAN Source: Journal of Commerce, Various Years
90 48 0 757 511 2 1 25 50 21 209 94 0 24 160
83 7 750 68 4 11 30 83 10 170 1 37 270
1,104 3 890 91 15 52 13 122 147 10 129
2005 TEUs 7,630 2,002 1,179 687 2 17 37 75 17 233 230 22 258
21,791 1,952 1,306 1,148 232 226 314 169 15 316 320 16 369
37,032 6,581 2,019 1,470 913 885 287 159 749 610 329 379 89 174
Top destination ports for soybean shipments are similar to corn, with China’s ports of Kaohsiung, Tiachung, and Taiwan having the largest volumes in recent years. Semarang, Indonesia is third among ports as destinations for U.S. containerized soybeans. Several Japanese ports are consistent destinations for this export commodity, receiving shipments in each of the six years. Malaysia increased its imports of containerized U.S. soybeans in recent years, with 1,779 TEUs in 2007. This volume is the fifth largest among all the destination ports for U.S. containerized soybeans. These 15 ports account for 90 percent of the market in 2007. Table 16. Top 15 Destination Ports for U.S. Containerized Soybean Shipments, 2002 to 2007 Port
KAOHSIUNG CHINA TAICHUNG CHINA TAIWAN CHINA SEMARANG INDONESIA YOKOHAMA JAPAN SURABAYA INDONESIA NAGOYA JAPAN JAKARTA INDONESIA TOKYO JAPAN BELAWAN DELI INDONESIA OSAKA JAPAN JAPAN JAPAN INDONESIA INDONESIA QINGDAO CHINA KOBE JAPAN Source: Journal of Commerce, Various Years
2002 1142 249 0 0 2822 11 1841 20 2993 0 1476 0 0 0 1479
2003 968 9 3,301 2,076 11 2,770 1,880 6 1,247
2004 TEUs 591 7 3,446 2,591 38 1,866 117 2,293 2 1,333
2005 4,934 1,558 220 3,109 118 2,528 206 2,276 654 3,189 5 1,238
30,491 6,465 2,312 3,335 3,859 2,708 2,590 2,788 2,194 3,045 8 1,070
37,663 6,987 1,195 532 2,721 202 2,381 434 2,243 1,291 1,685 3,112 153 400 866
The market overview in this and previous sections provide context for understanding the scope and level of activities in the U.S. grain container market. The subsequent sections discuss the costs associated with the proposed COB alternative. This includes the potential to employ alternative strategies in securing empty containers considering other options available in this market.
SITUATIONAL FRAMEWORK FOR SUCCESS Intermodal or multimodal transportation is made up of several different parts. Whether it is bulk transportation or containerized, many dynamics play a role in the overall transportation system. Intermodal or containerized intermodal transportation may be more complex in some respects than other multimodal transportation because of the many players involved. A container movement may include trucking, terminal operations, railroad, port operations, steamship line, the shipper, freight broker or forwarder and others. Not only do all the players have a role in container shipping, but each entity needs a return on their investment. In conducting a study for feasibility of intermodal transportation in Eastern North Dakota and Western Minnesota served by the BNSF, executives from BNSF identified factors that make truck/rail container intermodal successful for rural applications (Berwick, 2006). The common denominators from the sources listed above indicate that at least five factors must exist for successful truck/rail intermodal. These are: 1) volume, 2) balance of traffic, 3) concentration of destination (density), 4) steamship company or equipment operator cooperation, 5) commitment of business and/or community. Most or all of these factors need to be in place for an intermodal facility or terminal to be successful. Even though all the previously stated factors are in place, the railroads, barge lines, and/or steamship lines may choose to not serve the facility because other business options may be more profitable. Being rational economic actors, these aforementioned businesses will choose projects or new business with the greatest potential. The railroad and steamship company’s goal is return on investment or profit and their experience provides them knowledge that equipment velocity provides the greatest return. Since deregulation of the rail industry, the Class 1 railroads have attempted to put the gathering of freight onto trucks, shortline railroads and regional railroads. This allows them to hook and haul long distances with dedicated trains that provide them with the best return on investment. The barge industry continues to deal with its own pricing and service paradigm for containers, given its limitation in operating on public waterways. The steamship lines control most containers that operate internationally. They also operate on the premise that equipment velocity or equipment turns equate to the greatest return on investment. In the past, the U.S. trade patterns established by demand and serviced by the steamship lines focused on high-revenue consumer products imported to the U.S. These high-revenue shipments encouraged equipment operators to ignore lowervalue export possibilities, such as grain, because it slows the velocity of equipment. Therefore, backhauls are not profitable if equipment is delayed by even a few days.
Conducting the study for Eastern North Dakota in 2005, it was apparent that the steamship lines regarded their policy of returning containers empty as the most profitable option. Entering 2008, this has changed somewhat because of the weakening dollar, demand for small lots of agricultural products, plus increases in bulk shipping rates. These occurrences have allowed more containers to be loaded for the return trip to Asia. All is not well, however, as most of these containers are loaded in close proximity to the large distribution centers, ports, or intermodal terminals. Moving containers long distances for loading of lower valued products is still an unlikely scenario. An article in American Shipper “Exit Strategy?”, states that containers are scarce and expensive for all not in close proximity to the unloading location. Reasons for this include: there is enough product close to ports and terminals to fill the desired number of containers; steamship lines still hold somewhat to their philosophy about returning empties for velocity of their equipment; and containers for export are up to three times heavier, creating some problems in loading ships and limiting the number of loaded containers that can be shipped. Therefore, even though grain exports by container are up 119 percent above a year ago and demand remains strong, there are problems and shortages of equipment. Within the same article, it was stated that because of high fuel costs and rail repositioning rates, some operators such as Maersk have eliminated service to rail rams in the West and Midwest because the service was unprofitable (Dupin, 2008). According to Jeff Maihiot of TSC Container Freight, a non-vessel operator that specializes in the grain business, some shippers have turned to transloading at the port rather than on-farm or at inland facilities. Statements attributed to Maihiot in the American Shipper article indicate, “transload companies have become very good at what they do, some can stuff a container in 90 seconds”. The article also stated that though the transload option exists, some transload facilities are near or at capacity (Dupin, 2008). Moreover, while shipping in covered hopper cars to the port may solve container access and expense in rural America, it does not solve the space issue on vessels where it may weigh out but have only half the slots filled due to heavy-load containers. The bottom line problems for container exporters remain similar to past issues, even though some conditions in containerizing grain for export have changed. In most cases, only shippers in close proximity to a distribution center or intermodal terminal have access to containers. For rural areas, equipment is difficult to access. Even if the equipment is available, it is increasingly expensive to reposition by either rail or truck and delays in shipping occur on a regular basis.
ESTIMATED SHIPMENT TIME AND COSTS FOR EXPORTING CONTAINERS “Traditionally, bulk ocean freight rates have been $25 to $40 per metric ton. But with increased international demand for bulk products, bulk freight rates are at an all time high of more than $100 per metric ton, while cargo container rates are closer to $65 to $75 per metric ton.” This quote was cited in storyline by John Russnogle from Brandon Bickham, DeLong Company Inc., Clinton, WI. Figure 24 illustrates the relationship between bulk rates out of the Pacific Northwest, bulk shipping rates at the Gulf and container rates. This figure shows the spike in bulk rates, which reduces the relative shipping costs for containers.
Per Metric Ton
4.00 Bulk via PNW 3.00
Bulk via Gulf Container
Source: U.S. Department of Agriculture, 2008
Figure 24. Container and Bulk Grain Rates to Japan In a presentation at the Midwest Agricultural Transportation Conference, Johnathan Red from Sea Point, LLC, estimated the time differences of shipping to Asia by bulker versus container. The graphic has been modified based on interviews with industry experts, it shows that containerized product would arrive in about half the time of bulk shipped commodities (Table 17). Shipping by container presents many advantages for agricultural commodities. The integrity of the commodity is preserved as there is no comingling if the container is loaded at a source of control. Inventory volumes are less as shipments can be more frequent. Smaller shipments of many different products can result in a desired finished product. Smaller shipments may also result in more manageable quantities. In addition, there may be less handling of the commodity.
Table 17. Estimated Delivery Days for Shipment from Mid-America to Asia 3 Bulker Local Delivery Shuttle Elevator Rail Car Export Terminal Bulk Shipment Import Terminal Local Delivery Total
Days 1 15 8 5 12 10 1 42
Container Local Delivery Intermodal Term Double Stack Intermodal Term Container Ship Intermodal Port Local Delivery Total
Days 1 2 4 2 11 2 1 23
Costs to ship quantities vary depending on transportation demand, as shipping rates vary with supply and demand and competition. In 2007, for instance, bulk shipping rates increased and resulted in container rates becoming relatively competitive with bulk. However, many shipper rates are contract rates, making it difficult to accurately estimate rates for a particular shipping lane. Jonathan Red estimated costs to Asia using COB versus standard drayage to the rail terminal in Chicago, then to the port and finally to Asia. The estimated costs from Chicago to Asia were $1800 per 40 foot container carrying 24 tons and $1300 from St. Louis. At the time of Mr. Red’s presentation, BNSF had a rail limitation of 24 tons in a 40 foot container. They have since relaxed these limits to 52,900 pounds for a 20 foot, and 67,200 for a 40 foot container. According to Hapag-Lloyd, the permissible gross weight for their containers are 67,056 pounds for either the 20 foot or 40 foot ISO container. These limits are standard for ISO (Hapag-Lloyd Container Line, 2008). Again, if these containers are not loaded at the terminal or river port, regulations would limit the containers to about 25 tons to meet the 80,000 pound truck weight limit. An ideal scenario would be a traffic balance of inbound containerized freight destined for somewhere in the Beardstown vicinity, plus a way to capture those containers for backhaul opportunity. The current scenario is empty containers need to be repositioned, most likely from Chicago. Other options may exist where containers destined to manufacturers, warehouses or big box distribution centers could be captured and moved to Beardstown for immediate use as backhaul. Otherwise, containers could be repositioned from Chicago by barge or drayed from St. Louis, Kansas City or Decatur. The terminal with the most abundant pool is currently at Chicago, where estimated monthly figures indicate 30,000 to 40,000 containers return empty to foreign ports. Capturing containers is problematic for customers located long distances from a large container terminal such as Chicago. Steamship operators as of now are choosing to fill containers for backhaul close to the terminal, which limits their turnaround time and ability to keep on target for equipment velocity. If backhaul opportunity was to slow 3
Based on interviews with industry experts. Interviewees stressed that illustrations of timelines are very susceptible to variation. 43
down, the equipment operators would be more likely to increase the distance and time allowed for gathering backhauls. Scenario analysis can be performed to estimate the costs associated with different movements to Asia. Although this may provide relative cost differences, it is only an estimate of costs. As stated earlier, shippers may have contract rates with their transportation provider. The transportation provider may be an NVOCC, third party logistics operator, a freight broker, steamship operator, or other option. Three scenarios were provided by Jonathan Red in his presentation to the Midwest Agricultural Transportation Conference in August, 2007. All options presented were geographically positioned through Chicago. The fourth option presented is COB to the Gulf of Mexico, transferred to a container ship and on to Asia through the Panama Canal (Table 18). The first option is COB to Chicago where the container is transferred to a train for movement to the coast. The second option includes rail and truck to Chicago, where the container is transferred to a doublestack train for movement to the coast. The third possibility is a transload at Chicago, which includes a long truck movement. The advantage to COB at Beardstown is the possibility of loading containers to the ISO Standard 668, which allows a maximum gross weight of 67,050 pounds in a 40 foot container. This could increase payload that would be allowed on the highway by an estimated 5 tons. The cost components of scenario 1 include draying the container to the barge, lift fee onto the barge, moving the container to Beardstown, the facility fee for loading and transferring the container, moving the container back to Chicago, drayage to rail, lift fee to put on doublestack, rail costs to the coast, and the ocean freight rate to Asia. Payload in this scenario is governed by highway truck movements. If the transfer to rail is without a highway movement, the payload can increase by 5 tons which will reduce costs per ton. Cost components of scenario 2 include drayage to and from the rail terminal, lift fee at the rail, rail costs to the coast and the ocean freight to Asia. Payload in this scenario would be limited because of highway truck miles. Scenario 3 cost components include trucking to a transload facility, the transload fee, the lift fee to the doublestack train, rail to the coast, and the ocean freight rate. This scenario is limited by truck highway weight limitations of 80,000 pounds. However, there is an option of loading the container at the transload facility to the highest common denominator of all shipping options. This may eliminate highway movements if the transload facility is located at the intermodal terminal.
Table 18. Scenario Analysis of Different Shipping Options Cost per Container (Chicago) Cost per Container (Gulf) Rail & Transload COB COB to Truck to at to Chicago Chicago Chicago Gulf Drayage to Barge $200 Drayage to Barge Lift Fee to Barge $80 Lift Fee to Barge $80 Barge to Beardstown $125 Barge to Beardstown $225 Facility Fee $300 Facility Fee $300 Barge to Chicago $125 Barge to Gulf $225 Lift Fee from Barge $80 Lift Fee from Barge $80 Drayage to Rail $200 $700 Drayage to Rail Truck to Transload
$621 Truck to Transload
$200 Transload Fee
Lift Fee to Rail Rail to Coast
$60 $900 $1,350
$60 Lift Fee to Rail $900 Rail to Coast Ocean Freight $1,350 Through Panama
Cost Per Container Cost Per Ton Tons
$3,220 $134 24
$3,010 $125 24
$3,131 $106 29.5 Tons
$2,660 $90 29.5
Note: Adapted from Jonathan Red, 2007.
Estimated costs for the different scenarios indicate if a gulf coast region shipping option was available, shipping rates would be reduced by an estimated $16 per ton over the next least expensive option. COB to Chicago would be reduced if: 1) the dray from the barge to rail is not via the Federal Highway or State Highway system and, 2) is an internal port move where the truck could operate above 80,000 pounds. Scenario 3, transload at Chicago, assumed that more than one container load of product would be shipped. Therefore, more than a truckload would be hauled to the transload facility, which would allow for the higher container weight. Again, this option carries an assumption that the transload facility is located where no Federal or State Highway connectivity is needed.
CONCLUSIONS A large share of U.S.-based container trade is attributed to consumer goods imported from Asian markets. This inbound container traffic flow remains well ahead of the export traffic, creating a large imbalance. This traffic imbalance in some trade lanes has created opportunities to move lower-value goods, such as grains and feedstuffs, through these channels as backhaul goods. Container-on-barge (COB) is a viable and logical option for moving products to either intermodal terminals or ports. This option provides a low cost option for drayage on the U.S. inland waterway system. Illinois agriculture producers may have an opportunity to enter the dynamic international container market using COB. With ready access to key intermodal yards at the Chicago gateway and future possibilities of moving containers via the Gulf ports, it may be a burgeoning market for smaller units and containerized agricultural products based on a competitive and locational advantage along an inland waterway. Beardstown is an agricultural hub positioned along the Illinois River in west central Illinois. It is located in Cass county. With an extended geography that includes the surrounding counties of Brown, Mason, Menard, Morgan, Sangamon, and Schuyler, this region may supply product for a business developed around logistics advantages of COB. The agricultural activity in surrounding market regions lends itself to current containerized agricultural trade growth. Illinois ranks third nationally in the shipments of containerized agriculture products – agricultural products is defined as grain other field crops for this study. Volumes have been increasing, and in 2007 over 100,000 agricultural containers were originated by Illinois shippers. Soybeans were the largest volume product in the mix, accounting for almost half of the total agricultural container shipments followed by corn. In addition, wheat shipments have also grown in recent years. Regarding potential future growth, renewable fuels by-products have potential. Ethanol production has grown at an unprecedented rate and Illinois ranks third nationally in the production of ethanol. The co-product of ethanol production is DGs or DDGs (distillers grain or dried distillers grain) which is a good livestock feed. DDGs are now being exported and have the potential of becoming a larger part of the export mix among animal feed. DDGs and their uses are just in their infancy. As uses are developed for the estimated 3.7 million tons of DDGs that will be produced in Illinois, it is apparent that some of the feed or other products developed will be suited for export in containers. Examining cost components of exporting products from Illinois proves COB has an advantage over rail/highway intermodal if the container can be loaded at the river port. The low cost option in the scenario analysis is shipping containers to the Gulf of Mexico via the Mississippi River. Payload is a factor in costing the container movements as larger payloads drive down costs. Not having to abide by Federal and State Highway weight restrictions allows for larger payloads, resulting in greatly reduced costs. The drawback of loads going to the gulf is added time and expense of moving through the Panama Canal.
The information developed in this report provides a resource for continued development in the movement of U.S. agricultural goods via container. Understanding market trends, shipping line decisions, and viable container pools are all important in developing a new inland container facility. As aforementioned, the nature of containerization requires the individual business to build a seamless, multimodal logistics channel. A first step for any new intermodal venture is to gain commitment from all players in the presumed channel. Assuming the commitment and fundamental factors have been considered and met, along with individual business market knowledge and ROI criteria, the competitiveness of COB logistics costs supports expansion of COB activity along the Illinois River.
REFERENCES American Association of Railroads, 2007, Industry Statistics. Berwick, Mark and Mark Lofgren. Potential of Establishing a Logistics Center in Eastern North Dakota. UGPTI, Fargo, ND. January, 2006. Burlington Northern Santa Fe, 2008, accessed online March 21, 2008 at www.bnsf.com/markets/intermodal/index.html Canadian National, 2007, Ship from North America to China, Accessed online September 3, 2007 at www.cn.ca/specialized/china/shipto_china/grain/en_KFChina_grain.shtml. Canadian National, 2006, CN opens $4 Million Grain Container Facility in Edmonton, November 2006, Accessed online September 3, 2007 at www.cn.ca/about/media/news_releases/2006/4th_quarter/en_News20061116.sht ml. Columbiana County Port Authority, Transportation Mode Comparisons, Accessed online January 19, 2008 at www.ccpa-ohioriver.com. Cronin, William. (1991) Nature’s Metropolis: Chicago and the Great West. W. Norton, New York. Davis, Jeff, 2006, Emma Maersk: The Largest Cargo Ship in the World, Telestar Logistics, November 29, 2006, accessed online August 14, 2007 at telstarlogistics.typepad.com/telstarlogistics/2006/11/the_largest_con.html. Drewry Shipping, Containerization International, Various Years. Dupin, Chris. April, 2008, Exit Strategy?, American Shipper. Ethanol Production Capacity by Plant. Official Nebraska Government Website. Accessed on-line March 8, 2008 at www.neo.ne.gov/statshtml/122.htm. Hanson Professional Services, Inc., 2007, Business Perspectives of the Feasibility of Container-on-Barge Service: Alabama Freight Mobility Study Phase I, Prepared for the Coalition of Alabama Waterway Associations, April 9, 2007. Hayenga, Marvin and Robert Wisner, 1999, Cargill's Acquisition of Continental Grain Merchandising Business, Staff paper #312, Department of Economics, Iowa State University, Ames. Geography of Transportation Systems. Jean-Paul Rodrigue, Claude Comtois, and Brian
Slack. Routledge. 2006. ISBN 0-415-35441-2 Grier, David, 2007, Improving and Expanding Inland Waterway Containerization, Presentation at the Short Sea Shipping Conference, Orlando, Florida on April 17, 2007. Hapag-Lloyd Container Line, 2008, Container Packing, Special Cargo Department, accessed online March 2 at www.hapag-lloyd.com/applets/Cont_pack.pdf. Journal of Commerce, 2001-2006, Port Import Export Reporting Service (PIERS), Data Subscription, New York, New York. Leach, Peter, 2007, That Sinking Feeling, Journal of Commerce, Volume 8(49): 12-18. Missouri Department of Transportation, 2007, Missouri Waterways: Feasibility of Container on Barge. Mongelluzzo, Bill, 2007, Cream of the Crop, Journal of Commerce, Volume 8(46): 1215. Nebraska Energy Office, 2008, State of Nebraska, accessed March 16 at www.neo.ne.gov/statshtml/122.htm. Pitcher, Eric, 2007, BNSF Railway, Presentation at the Midwest Agricultural Transportation Conference, Naperville, Illinois, August 8-9, 2007, accessed September 26, 2007 at mat.ilfb.org. Port of Pittsburg Commission, Cargo Capacity Comparison, Accessed online January 19, 2008 at www.port.pittsburgh.pa.us/docs/mode_capacities.pdf. Ratajczyk, Craig, 2005, Targeting Competitive Marketing Channels, U.S. Soybean Export Council, Inc., St. Louis, Missouri. Red, Jonathan, 2007, Containerized Grain Shipping: Your Growing Option, Presentation at the Midwest Agricultural Transportation Conference, Naperville, Illinois, August 9, 2007. University of Minnesota, 2008, Distillers Grains in Livestock and Poultry Feeds, accessed online March 18, 2008. www.ddgs.umn.edu/more.htm. Union Pacific Railroad, 2007, Intermodal Facilities Maps, Accessed online December 16, 2007 at www.uprr.com/customers/intermodal/intmap/index.shtml. U.S. Army Corp of Engineers, 2007a, Navigation Data Center, Waterborne Commerce of the United States, accessed online August 12, 2007 at www.iwr.usace.army.mil/NDC/data/data1.htm.
U.S. Army Corp of Engineers, 2007b, Navigation Information Connection, Accessed online December 15, 2007 at www2.mvr.usace.army.mil. U.S. Census, 2008, accessed online January 1, 2008 at www.census.gov.. U.S. Census, 2007, County Business Patterns, accessed online September 15, 2007 at www.census.gov/epcd/cbp/view/cbpview.html. U.S. Department of Agriculture, 2006, Agricultural Marketing Service, Grain Transportation Weekly, December 14, 2006, accessed online August 4, 20007 at www.ams.usda.gov/tmdtsb/grain/2006/12-14-06.pdf. U.S. Department of Agriculture, 2007, National Agricultural Statistics Service, Agricultural Statistics Database: Quick Stats, Accessed August 25, 2007 at www.nass.usda.gov. U.S. Department of Agriculture, 2008, Agricultural Marketing Service, Grain Transportation Weekly, Various Editions, www.ams.usda.gov/tmdtsb/grain. U.S. Department of Transportation, Various Years, U.S. Public Use Waybill Sample, Surface Transportation Board, Washington, D.C. U.S. Department of Transportation, 2007a, America’s Container Ports: Delivering the Goods, Research and Innovative Technology Administration, Bureau of Transportation Statistics, March 2007, Washington, D.C. U.S. Department of Transportation, 2007b, National Transportation Statistics, Research and Innovative Technology Administration, Bureau of Transportation Statistics, April 2007, Washington, D.C. U.S. Department of Transportation, 2007c, U.S. Waterborne Foreign Container Trade by U.S. Custom Ports, Maritime Administration, Washington, D.C. U.S. Wheat Associates, 2007, Wheat Letter – June 28, 2007, Washington, D.C. Vachal, Kimberly and Heidi Reichert, 2002, U.S. Containerized Grain and Oilseed Exports: Industry Profile – Phase I, MPC Report No. 02-132, North Dakota State University, Fargo.
APPENDIX A. ILLINOIS RIVER INDEX
Source: U.S. Army Corp, 2007b
Source: U.S. Army Corp, 2007b
APPENDIX B. BARGE GRAIN FACILITIES Barge Grain Facilities on the Illinois River, 1999 Name
Barge Loadout Capacity
Per Day (shared) Archer Daniels Midland ARCHER DANIELS MIDLAND CO
ARCHER DANIELS MIDLAND CO
ARCHER DANIELS MIDLAND
ARCHER DANIELS MIDLAND
ARCHER DANIELS MIDLAND
ARCHER DANIELS MIDLAND
ARCHER DANIELS MIDLAND
ARCHER DANIELS MIDLAND
ARCHER DANIELS MIDLAND
ARCHER DANIELS MIDLAND
ARCHER DANIELS MIDLAND
ARCHER DANIELS MIDLAND
ARCHER DANIELS MIDLAND
CHILLICOTHE SPRING VALLEY
ARCHER DANIELS MIDLAND
Cargill Incorporated CARGILL INCORPORATED
FLORENCE SPRING VALLEY
Consolidated Grain & CONSOLIDATED GRAIN & BARGE
CONSOLIDATED GRAIN & BARGE
CONSOLIDATED GRAIN & BARGE
Consolidated Grain and Barge
Continental Grain CONTINENTAL GRAIN CO.
CONTINENTAL GRAIN COMPANY
CONTINENTAL GRAIN COMPANY
CONTINENTAL GRAIN COMPANY
CONTINENTAL GRAIN COMPANY
CONTINENTAL GRAIN COMPANY
CONTINENTAL GRAIN COMPANY
CONTINENTAL GRAIN COMPANY
MORRIS SPRING VALLEY
FARMER'S ELEVATOR COMPANY
CLARKSON GRAIN JERSEY COUNTY GRAIN COMPANY
SOURS GRAIN COMPANY
Source: Hayenga andWisner,1999
APPENDIX C. BUREAU OF ECONOMIC ANALYSIS AREAS
Beardstown, IL BEA Market Area
APPENDIX D. RAIL CONTAINER VOLUMES BY ORIGIN BEA Origin BEA Chicago-Gary-Kenosha, IL-IN-WI Los Angeles-Riverside-OrangeCnty,CAAZ Seattle-Tacoma-Bremerton, WA New York-NewJrsy-LongIsland, NY-NJCT-PA-MA-VT Dallas-Fort Worth, TX-AR-OK Memphis, TN-AR-MS-KY San Francisco-Oakland-San Jose, CA Houston-Galveston-Brazoria, TX Kansas City, MO-KS Atlanta, GA-AL-NC Jacksonville, FL-GA Norfolk-Virginia Beach-Newport News, VA-NC St. Louis, MO-IL Detroit-Ann Arbor-Flint, MI Washington-Baltimore,DC-MD-VA-WVPA Portland-Salem, OR-WA Miami-Fort Lauderdale, FL Harrisburg-Lebanon-Carlisle, PA Boston-Worcstr-Lawrence-LowellBrckton, MA-NH-RI-VT Charleston-North Charleston, SC Savannah, GA-SC Philadelphia-Wilmington- Atlantic City, PA-NJ-DE-MD Salt Lake City-Ogden, UT-ID Columbus, OH San Antonio, TX Lubbock, TX Minneapolis-St. Paul, MN-WI-IA New Orleans, LA-MS Louisville, KY-IN Denver-Boulder-Greeley, CO-KS-NE Alberta Reno, NV-CA Fresno, CA Lexington, KY-TN-VA-WV Toledo, OH Paducah, KY-IL Buffalo-Niagara Falls, NY-PA Pittsburgh, PA-WV Jackson, MS-AL-LA
Average Average 2001-2003 2004-2006 Tons 41,377,297 46,659,931
7,597,914 6,673,442 6,485,431 5,513,972 3,928,402 4,185,683 3,605,587 2,861,568
5,947,658 4,653,170 5,291,478 4,885,119 3,869,653 3,111,006 2,970,120 2,893,970
7,461,648 6,265,882 5,942,159 5,632,885 3,938,929 3,797,772 3,574,167 3,190,610
1,513,990 1,612,712 650,681 747,766 69,276 686,766 604,047 296,640
25% 35% 12% 15% 2% 22% 20% 10%
1,746,023 2,054,349 2,249,218
1,627,347 2,007,630 1,501,059
2,028,241 1,916,082 1,914,338
400,894 (91,548) 413,279
25% -5% 28%
1,349,143 1,190,394 1,268,366 1,334,232
2,011,497 1,457,260 1,368,620 672,174
1,774,753 1,249,514 1,210,931 1,177,048
(236,744) (207,746) (157,688) 504,874
-12% -14% -12% 75%
967,337 826,000 813,394
1,004,071 580,861 700,469
967,707 899,067 846,733
(36,364) 318,205 146,264
-4% 55% 21%
834,966 792,062 1,583,365 373,841 243,794 56,864 116,321 157,160 56,874 25,924 67,640 12,809 86,885 400 4,788 17,800 30,042 16,843
870,912 542,936 583,427 723,835 1,413,769 141,077 238,020 236,649 281,105 83,760 37,749 187,274 3,987 7,960 155,508 35,707
601,152 558,278 535,788 527,923 206,268 102,137 100,121 98,387 85,943 64,069 64,000 40,738 39,277 28,200 24,474 20,947 20,681 15,948
(269,760) 15,342 (47,638) (195,911) 206,268 (1,311,631) (40,956) (139,633) (150,706) (217,036) (19,759) 2,989 (147,997) 24,213 24,474 12,987 (134,828) (19,759)
-31% 3% -8% -27% na -93% -29% -59% -64% -77% -24% 8% -79% 607% na 163% -87% -55%
Change 0103 to 0406
Origin BEA Casper, WY-ID-UT Cleveland-Akron, OH-PA Fargo-Moorhead, ND-MN Cincinnati-Hamilton, OH-KY-IN Mobile, AL Spokane, WA-ID Portland, ME Omaha, NE-IA-MO Little Rock-North Little Rock, AR Charlotte-Gastonia-Rock Hill, NC-SC Evansville-Henderson, IN-KY-IL Western Oklahoma, OK Knoxville, TN Fort Wayne, IN Birmingham, AL Albany-Schenectady-Troy, NY Phoenix-Mesa, AZ-NM Lake Charles, LA Charleston, WV-KY-OH Grand Rapids-Muskegon-Holland, MI Orlando, FL Grand Forks, ND-MN Tupelo, MS-AL-TN Raleigh-Durham-Chapel Hill, NC Syracuse, NY-PA Indianapolis, IN-IL Sacramento-Yolo, CA Shreveport-Bossier City, LA-AR Nashville, TN-KY Greenville, NC Des Moines, IA-IL-MO Asheville, NC Northern Michigan, MI Green Bay, WI-MI Appleton-Oshkosh-Neenah, WI Amarillo, TX-NM Wichita, KS-OK Joplin, MO-KS-OK Champaign-Urbana, IL Boise City, ID-OR El Paso, TX-NM Bangor, ME Rochester, NY-PA Greensboro-Winston-Salem-High Point, NC-VA Columbia, SC Wilmington, NC-SC
2006 25,900 8,080 17,375 400 800 2,683 6,400 800 2,760 1,207 9,552 5,680 2,521 4,800 2,840 1,200 2,400 1,361 1,360 1,200 -
Average Average 2001-2003 2004-2006 Tons 1,074,747 14,127 637,006 13,254 13,942 12,633 269,506 7,454 20,909 7,213 150,448 7,015 3,771 5,440 10,628 5,239 11,053 4,893 6,786 4,587 33,539 3,503 3,184 12,720 2,987 2,173 220,667 2,093 5,547 1,733 67 1,680 1,678 2,360 1,600 1,480 41,436 1,453 1,267 5,413 1,267 3,333 1,213 587 1,027 68,969 987 38,845 880 11,525 840 2,013 816 2,427 813 30,971 800 800 800 41,297 800 25,413 667 561 19,188 454 453 60,733 400 3,587 293 307 253 4,133 400 6,307 1,333 7,454
Change 0103 to 0406 (1,060,620) (623,752) (1,309) (262,051) (13,696) (143,433) 1,669 (5,389) (6,159) (2,200) (30,036) 3,184 (9,733) 2,173 (218,573) (3,813) 1,613 1,678 (760) 1,480 (39,983) 1,267 (4,146) (2,120) 440 (67,982) (37,965) (10,685) (1,197) (1,613) (30,171) 800 800 (40,497) (24,746) 561 (18,735) 453 (60,333) (3,293) (53) (4,133) (400)
-99% -98% -9% -97% -66% -95% 44% -51% -56% -32% -90% na -77% na -99% -69% 99% na -32% na -96% na -77% -64% 75% -99% -98% -93% -59% -66% -97% na na -98% -97% na -98% na -99% -92% -17%
(6,307) (1,333) (7,454)
Augusta-Aiken, GA-SC Tampa-St. Petersburg- Clearwater, FL Tallahassee, FL-GA Dothan, AL-FL-GA Albany, GA Macon, GA Columbus, GA-AL Beaumont-Port Arthur, TX Davenport-Moline-Rock Island, IA-IL Wausau, WI Duluth-Superior, MN-WI Lincoln, NE Grand Island, NE Tulsa, OK-KS Billings, MT-WY Missoula, MT Redding, CA-OR Eugene-Springfield, OR-CA Pendleton, OR-WA Richland-Kennewick-Pasco, WA U.S. Origin BEA Total 153,987,809 Source: U.S. Department of Transportation, Various Years
Average Average 2001-2003 2004-2006 Tons 8,120 1,133 2,533 400 1,307 12,667 3,760 1,450 4,054 1,172 14,108 8,103 8,103 991 42,522 60,168 3,228 25,250 613 14,210 132,163,445 147,745,186
Change 0103 to 0406 (8,120) (1,133) (2,533) (400) (1,307) (12,667) (3,760) (1,450) (4,054) (1,172) (14,108) (8,103) (8,103) (991) (42,522) (60,168) (3,228) (25,250) (613) (14,210)
-100% -100% -100% -100% -100% -100% -100% -100% -100% -100% -100% -100% -100% -100% -100% -100% -100% -100% -100% -100%
APPENDIX E. RAIL CONTAINER SHIPMENTS, BY COMMODITY GROUP Commodity Group Empty Containers Food/Kindred Waste/Scrap Chemical/Allied Transport Eqpt Freight Fwdr Pulp/Paper Apparel Farm Products Rubber/Plastics Sm Pkg Freight Electric Machinery Lumber Misc Freight Mail Furniture Primary Metals Concrete Product Fabrictd Metals Misc Manufacturing Machinery Printed Matter Petro/Coal Prod Non-Metallic Ores Textile/Mill Shipper Assn Photogphy/Clocks Marine/Fish Leather & Prod Hazardous Waste Ordnance/Accessory Coal Forest Products Metallic Ores Tobacco Product Natural Gas/Petro Misc Mixed
2006 Tons 14,633,679 7,125,572 5,231,148 4,081,279 5,142,134 3,890,641 2,655,480 2,053,918 1,666,023 1,539,541 1,199,412 1,267,470 862,659 846,272 530,938 646,380 684,649 490,389 670,883 417,306 460,304 369,219 316,935 215,339 185,966 181,561 109,540 48,058 55,965 65,082 57,875 117,305 27,280 18,841 4,129 135,206,781
Average Average 2001-2003 2004-2006 Tons 9,653,673 12,133,772 8,406,777 7,598,899 5,357,628 5,801,034 4,613,011 4,713,085 3,413,614 4,591,506 4,223,690 3,480,426 2,962,446 2,756,996 1,953,606 2,266,824 1,898,305 1,824,140 1,683,893 1,634,203 1,723,883 1,281,998 1,209,710 1,257,412 2,046,012 992,917 912,185 799,939 1,906,834 791,645 853,092 777,505 693,222 720,300 1,179,629 612,879 617,133 598,601 633,111 484,336 529,592 478,691 551,096 449,272 325,783 323,714 357,552 274,932 310,592 257,215 511,659 225,045 63,659 97,287 105,235 78,895 60,865 75,025 117,469 69,896 51,654 56,964 1,408,259 49,417 101,869 48,949 173,392 14,760 12,909 1,376 1,268 453 111,979,642
Change 0103 to 0406 26% -10% 8% 2% 35% -18% -7% 16% -4% -3% -26% 4% -51% -12% -58% -9% 4% -48% -3% -23% -10% -18% -1% -23% -17% -56% 53% -25% 23% -40% 10% -96% -52% -91% -89% -64% 18%
Source: U.S. Department of Transportation, Various Years